I've been long the Dax and short the FTSE since the end of "the war"... Now I Calculate them to be too tight, and importantly, only at these levels. ... action is over now until the U.S opens, time to sit in the Garden and get some sun
How did you decide the dax would outperform the ftse? What do you use to chart the spread and what ratio do you use? Where are you living?
I run a private hedge fund In west London, I have historical data going way back... plot all the indexes levels against the spreads between them... patterns emerge.. construct regression lines, use some math (y=mx+c)to get gradients and intercepts.. the ratio of the gradients is the "beta"... the Dax has a higher beta than the FTSE.The overall view is "long", therefore they will tighten or rather the probability they will tighten is in your favour... at the moment they have tightened enough and I calc them to be over 80 points tighter than they should be(dax/ftse).. wait until one index reaches out to a support/resistance level.. place the trade. Job done. I do the odd punts, but with a large fund buying of single contracts moves markets